Oppenheimer analyst Ittai Kidron this morning reduced his rating on Research In Motion (RIMM) to Perform from Outperform, noting that the stock has rallied on speculation that the company could be an acquisition target – an outcome he finds unlikely.
“Our checks suggest demand remains solid near term and we believe RIMM can meet and potentially beat low expectations over this quarter,” he writes in a research note. But he adds that “competition is only getting tougher and while RIMM has made some improvements to its portfolio/OS, we don’t believe it’s enough to withstand the pressures in FY 2012. Although valuation is still attractive, we don’t believe investors will reward RIMM with a higher multiple until it addresses the competitive challenges on a sustainable basis. Thus, we’re moving to the sidelines.”
As for the M&A speculation, Kidron writes that a deal seems like “a remote possibility,” asserting that it is “unlikely any of the speculated suitors could reasonably justify splurging on RIMM,” with its nearly $30 billion market cap. “We also think tough integration hurdles and limited revenue synergies make an acquisition improbable.”
RIMM is down $1.58, or 2.8%, to $54.25.
Yesterday: RIMM Rallies On Deal Rumors; Kaufman Skeptical; Cisco A Fit?
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